On Thursday, February 6, 2013, three congressional committees—the Senate Finance, House Ways and Means and House Energy and Commerce—introduced collaborative bipartisan legislation to repeal the sustainable growth rate (SGR), Medicare’s controversial physician payment formula, and replace it a system based on value versus volume of care. Although the committees agreed on policy, the lawmakers did not agree on who will pay the cost, which is about $126 billion over 10 years, according to a Congressional Budget Office report. If the legislation passes, Medicare-participating physicians would avert the 23.7% payment cut scheduled to occur on April 1.

If enacted, the SGR Repeal and Medicare Provider Payment Modernization Act will sufficiently change Medicare Part B payments. Below is a summary of some of the significant proposals.

  1. Repeal the SGR
    • The legislation would permanently repeal the SGR and provide an annual update of 0.5% from 2014 through 2018. The 2018 payment rates would be maintained through 2023 so physicians have time to receive additional payments through a merit-based incentive payment system.
  2. Establish a Merit Based Payment System
    • In 2018, payments will be based upon the new Merit-Based Incentive Payment System (MIPS) which consolidates the Physician Quality Reporting System (PQRS), Value-Based Modifier, and “meaningful use” program for electronic health records (EHRs). The MIPS would apply to doctors of medicine or osteopathy, dental surgery or dental medicine, podiatric medicine, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists. Other professionals who are paid under the physician fee schedule may be included starting in 2020 if viable performance metrics are available.
    • Under the MIPS, payments are based upon quality, resource use, meaningful use and clinical practice improvements. Under that system, penalties for underperformers are capped at 4% in 2018, 5% in 2019, 7% in 2020 and 9% in 2021. Rewards for exceptional performers are capped at $500 million per year from 2018 through 2023.
  3.  Push to Alternative Payment Models
    • Physicians who receive a significant percentage of Medicare revenue from an alternative payment model such as an accountable care organization will receive a 5% bonus starting in 2018. The payment model must involve a certain amount of risk for financial losses and include a quality measurement component. However, patient-centered medical homes are exempt from the financial risk obligation if the model works in the Medicare population. In addition, alternative payment models from private payers and Medicaid will be taken into consideration if no Medicare model exists in a provider’s area. Providers who participate in an alternative payment model will be exempt from the MIPS. CMS would also create a Technical Advisory Committee to study physician-focused alternative payment model proposals.
  4.  Collaborate with Providers on Quality Measures
    • By May 1, 2015, CMS must publish a plan for the development of quality measures for the incentive payment system and alternative payment model. Congress directed CMS to develop the plan with physician feedback and update it annually. HHS will also receive $15 million annually through 2018 to develop such a plan. HHS is directed to contract with entities, which could include physician organizations, to develop priority measures and focus on measures that can be reported through an electronic health record.
  5. Create a Care Management Code
    • The bill mandates that CMS create a billing code for care management services for patients with complex chronic conditions. This is already in progress.
  6.  Revalue Certain CPT Code
    • To ensure proper reimbursement rates, the bill requires if Medicare spends 0.5% above the estimated amount for certain codes in 2015-2018, then CMS must revalue the codes for the following year. The revaluation process requires a Government Accountability Office study of the American Medical Association’s Relative Value Scale Update Committee (RUC) processes.
  7.  Constrain Advanced Diagnostic Imaging Codes
    • Starting in 2017, Medicare will only pay for diagnostic imaging services that meet certain criteria, including appropriate-use criteria. Also in 2017, CMS must identify doctors who have low adherence to appropriate-use criteria and, in 2020, will require these providers to obtain prior authorization for applicable imaging services.
  8. Publish Utilization and Payment Data
    • By July 1, 2015, HHS will publish utilization and payment data for physicians on a “physician compare” website. Doctors will be able to review and submit corrections prior to its publication. In addition, the bill stipulates that the website will indicate, where appropriate, that information may not be representative of the provider’s entire patient population, variety of services furnished, or the health conditions of the individuals treated. The law also permits agencies to sell non-public analyses and claims data to physicians to assist in quality improvement. Conversely, HHS will be required to make data available to those who request it, through clinical data registries designed to support quality improvement and patient safety. The bill prohibits the use of these new quality measures in a medical liability claim.
  9. Change of Opt-out Period
    • Physicians who opt out of Medicare may automatically renew after 2 years.
  10.  Require EHR interoperability
    • The proposed law requires EHRs to be interoperable by 2017 and prohibits providers from deliberately blocking information sharing with other EHR vendor products.

While the legislation is bipartisan and has a better chance of passing than most, it is still far from a done deal.  The main undecided issue is how to pay for it – the bill did not set out a way to pay for the expensive SGR repeal.  However, as more and more provider groups such as the AMA, the American College of Physicians and the American College of Surgeons throw their support behind the bill, the bill will hopefully have enough momentum and support to get the job done.